Why Taco Bell gives "Free Pepsi" ? 🌮🥫
Insight into selling 2 billion tacos.
Welcome to the 146th edition of the GrowthX Newsletter. Every Tuesday & Thursday I write a piece on startups & business growth. Today’s piece is going to 95,300+ operators & leaders from startups like Google, Stripe, Swiggy, Razorpay, CRED & more
Taco Bell sells 2 billion tacos 🌮
It generates ₹17,000 Cr in revenues 💰
It offers free Pepsi refills - here’s why ⬇️
The Pepsi story ✨
In 1978 PepsiCo purchased 868 Taco Bell restaurants for about $125 million. It led to going national first across the US & then global. It has a lot of McDonald's growth story vibes ;)
Here’s why Taco Bell isn’t crazy ⬇️
You must be wondering - Pepsi Co owns it so they do it. The answer isn't that simple. I assumed the exact same thing first time I got to know about this.
1/ It’s the right bundling 🌮 🥫🍟
Carbonated drinks go well with fast food. It's done and dusted playbook from the likes of KFC, McDonald's & Domino's.
2/ Great marketing hook 🎯
How many times have you bought a meal & not just the burger? - Taco bell exploits the insight.
3/ Average order value increase 💰
If you have been paying attention - the first Pepsi isn't free. You will buy it to claim the refill(s). That means majority orders will be "meal orders" - increasing the average order value by at least 50%.
4/ The margin game ❤️
Consider this - most customers refilling will do so a couple of times. As per Taco bell, average customer refill is less than 2. That's freaking crazy considering the exploitation customer could do but isn't. Cold drink margins are upwards of 70% for Taco bell. Makes sense.
5/ Steal deal behaviour 🔁
The free refill creates sort of a pull for every customer who has experienced the "free refill". They feel like - "I'm getting a steal deal every-time I go to Tack bell". Humans feels good when they feel like they got something at a cheaper price.
So, why isn't Taco Bell hyper growing in India? 🧐
1. It hasn't cracked the KFC code 🚫
It hasn't localised it's Tacos, yet. I mean KFC now has a Tandoori Zinger burger ;)
2. Missing "free refill" marketing 📢
The brand hasn't really advertised the refill part much. Unsure if it's a conscious call at a business strategy level but then it makes no sense to not use your golden ticket to penetrating the beverage moving customer.
3. Critical mass of try-outs 📊
Go to any freaking mall food court. You will see minuscule numbers of customers in a Taco bell ordering queue. It needs to solve for first time buying customer number, fast.
Quick action item for you → Do you operate in a crowded market? - what's your "Free Pepsi" feature? Think about this today & let your team think this one through.
That’s all for now 💙
Answer to wedging a market isn’t necessarily giving free stuff. You need to deeply understand your users, competitors and try to find your own whitespace. The only way you can identify this is by talking to customers. There is no shortcut. This is something that we help GrowthX members do every time they try to solve a growth problem. If you see a GrowthX member asking for user calling help this week on LinkedIn/ Twitter/ Instagram/ WhatsApp, help them out. Thanks for the good karma.
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